Disability Insurance Gaps and Opportunities in the Workplace
Synopsis and Key Points:
Employer Perspectives on Disability Benefits Study reveals group long-term disability insurance plays an important role in company benefit offering at some of the largest firms in the U.S..
Main DigestAre all options being considered to protect employees across the U.S.
The Employer Perspectives on Disability Benefits Study released today by Massachusetts Mutual Life Insurance Company (MassMutual) and The American College reveals that group long-term disability (GLTD) insurance plays an important role in a company's benefit offering at some of the largest firms in the U.S. based on sales revenue, with 71% of companies surveyed saying it is "extremely or very important."
However, gaps and shortfalls in most plan designs were exposed:
On average, only 60 percent of employees' base salary is covered by a GLTD program.
Only 27 percent of GLTD programs include variable compensation - leaving bonus and commission income unprotected.
The majority of group plans offers a basic foundation of coverage but limits benefits for high earners.
Surprisingly, just one-quarter of companies are considering making changes to their GLTD program in the future.
"It's a real travesty that employees are being left exposed when they don't need to be, and when they may not be aware of it," said Tara Reynolds, corporate vice president, MassMutual. "While group long-term disability programs provide strong foundational coverage, they may not meet the needs of all employees and they do not cover all sources of employment income. This study validated that there is a widespread issue, and that options are available to fill the gaps."
Why is this such an issue? Unfortunately, disability is a reality.
Bill Reid, a banquet manager from Casselberry, Florida knows firsthand about becoming disabled. He was just 32 years old when a horrific car accident in 2004 left him in serious condition. Bill's individual disability income insurance policy, which he purchased at the age of 26, now works to supplement the group long-term disability insurance coverage he had through his employer. By combining his benefits, Bill is able to maintain an income sufficient to keep him in his home and support his living expenses until he turns 65.
Without this level of advanced planning and disability income insurance coverage, Bill's lifestyle may have been very different today.
Other key findings of The Employer Perspectives on Disability Benefits Study include:
The opportunity to purchase "buy-up" coverage through a GLTD program is not widespread, with only 25 percent of employers offering this option to some or all employees.
Only 15 percent of companies surveyed offer individual disability income insurance to supplement their group plan.
Cost and administrative burden where cited as reasons why companies do not offer individual disability income insurance coverage, along with the option that employees can purchase it on their own outside of work.
And here within lies the opportunity.
Individual disability income insurance coverage can provide consumers with portable protection and, when offered through the workplace, discounted premiums and simplified underwriting. For increased protection, employees can select riders for catastrophic coverage or retirement contribution protection to help continue payments into a qualified plan and any employer matches.Comprehensive online education, application and administration systems to reach and educate more employees across the U.S. and to ease administrative efforts for employers are also available.
"Too many employees learn about the gaps in their group long-term disability insurance programs when they need the coverage the most - once they've become disabled," said Reynolds. "Since so many employees naturally look to their employers for their benefits, how would you feel if you had to tell an employee you didn't offer more comprehensive coverage because of cost or administrative burden"
For more information and tools to help you learn more, visit www.massmutual.com/DIstudy.
Research Methodology -MassMutual and The American College commissioned a study conducted by the Boston Research Group via telephone interviews between July and September 2010. The study sought information directly from benefit managers who are most familiar with their group disability insurance plan from a pool of 3,000 of the largest companies in the United States as measured by sales revenue. A total of 316 interviews were completed, representing a statistically reliable response rate.
About MassMutual -Founded in 1851, MassMutual is a leading mutual life insurance company that is run for the benefit of its members and participating policyholders. The company has a long history of financial strength and strong performance, and although dividends are not guaranteed, MassMutual has paid dividends to eligible participating policyholders every year since the 1860s. With whole life insurance as its foundation, MassMutual provides products to help meet the financial needs of clients, such as life insurance, disability income insurance, long term care insurance, retirement/401(k) plan services, and annuities. In addition, the company's strong and growing network of financial professionals helps clients make good financial decisions for the long-term.
MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives. MassMutual is headquartered in Springfield, Massachusetts and its major affiliates include: Babson Capital Management LLC; Baring Asset Management Limited; Cornerstone Real Estate Advisers LLC; The First Mercantile Trust Company; MassMutual International LLC; MML Investors Services, LLC, member FINRA and SIPC; OppenheimerFunds, Inc.; and The MassMutual Trust Company, FSB.
About The American College -The American College is a non-profit educational institution with the highest level of academic accreditation dedicated to leadership in innovative training and development for financial services professionals. The College is distinguished by resources of the highest quality, innovation in program delivery and design, and results that create sustainable advantages for our customers. Serving as a valued business partner to banks, brokerage firms, insurance companies and others for over 83 years, The American College has assembled a faculty of the foremost thought leaders in the industry to help companies and their employees succeed. For more information, visit www.TheAmericanCollege.edu
About Boston Research Group -Boston Research Group (BRG) is a strategic market research and consulting firm that specializes in the financial services and employee benefits industries. BRG conducts projects that deal with both strategic and tactical marketing issues, including loyalty and satisfaction, market segmentation, brand assessment, product development, sales processes, and distribution strategies. BRG's work focuses on applying market research information, collected and analyzed using qualitative and quantitative data collection techniques and methodologies, to provide solutions for marketing-related challenges. For more information, visit www.BostonResearch.com
*Riders are available at an additional cost and are subject to state availability.
Individual disability income insurance policies are issued by MassMutual, Springfield, MA. Policies have exclusions and limitations. For costs and complete details of coverage, call your agent or MassMutual at 1-800-272-2216 for a referral to an agent.
- 1: Disability Income Insurance Tips : California Department of Insurance (2011/11/24)
- 2: Choosing Between Disability Insurance and Critical Illness Insurance : Disabled World (2010/08/22)
- 3: Critical Illness Insurance Information : Colonial Life (2011/02/17)
- 4: Things to Consider When Buying Disability Insurance : Protect Your Income (2015/09/08)
- 5: Action Needed to Address Social Security Disability Insurance Finances : The National Academy of Social Insurance (2013/05/24)
- 6: Disability Insurance Services Campaign: What Will You Say : Disability Insurance Services Inc. (2011/04/25)
- 7: Critical Illness Insurance : Frank N. Darras (2009/10/28)
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